Prediction Markets Could Cost US Gaming $39.4bn Annually, Study Warns

The researchers examined the economic consequences of prediction markets operating nationwide under Commodity Futures Trading Commission (CFTC) oversight. The first scenario assumes sports event contracts remain available across all 50 states, with no existing sportsbook operators migrating to prediction market structures.

Under these conditions, tribal gaming could lose $1.5 billion annually, while commercial gambling operators could lose another $5.8 billion. Together, these losses could eliminate about 38,000 gaming industry jobs. The second scenario considers major sportsbook operators transferring substantial portions of their businesses to federally regulated prediction markets.

This could increase annual revenue losses to $17.9 billion and affect approximately 92,700 jobs. The third scenario introduces casino-style online gambling products without significant operator migration. The fourth, and most extensive, scenario combines sports betting, online casino products, and widespread operator migration.

Researchers estimate this could divert $39.4 billion in annual gaming revenue, including $7.8 billion from tribal operators and $31.6 billion from commercial businesses.

The study highlights how reduced gambling revenue could affect tribal governments beyond their casino operations. Under the most extensive scenario, state gaming taxes and tribal revenue-sharing payments could decline by $8.3 billion annually.

Researchers also projected the potential displacement of approximately $759 billion in consumer spending as gambling-related funds move away from local economies.

James Klas said:

The tax losses that we talk about are strictly related to declines in gaming revenue.

He explained that the projected tax losses do not include additional economic effects associated with changes in consumer spending. For tribal governments, gambling profits often finance public services, infrastructure and community development.

These concerns have also informed the IGA’s opposition to proposed CLARITY Act changes, which the association argues could weaken tribal gaming protections.

The research arrives as the CFTC moves to clarify how prediction market contracts should be classified under federal derivatives law. On 9 October, the regulator announced measures distinguishing traditional sportsbook wagers and casino games from event contracts.

Under the CFTC’s latest sports betting and prediction market rules, conventional gambling products are excluded from the swap definition. At the same time, a separate proposal seeks to classify certain event contracts as swaps.

The CFTC’s official rulemaking announcement confirms that the event contract classification remains subject to public consultation.

Meanwhile, the Sixth Circuit’s ruling against Kalshi demonstrates the continuing disagreement over federal authority and state gambling laws.

For tribal casinos, commercial sportsbooks and B2B suppliers, the research highlights potential financial consequences if prediction markets capture a larger share of gambling-related spending. The researchers modelled economic impacts over an approximately three-to-five-year period, assuming that prediction markets achieve broad access without state or tribal gambling restrictions.

However, these outcomes depend on unresolved legal and regulatory questions. An industry association that has publicly opposed expanding sports-related prediction markets also commissioned the study.

Assessing its projections should therefore be done alongside the underlying assumptions and alternative market forecasts once the full report becomes publicly available. For now, the findings add an economic perspective to the continuing debate over prediction market regulation, tribal sovereignty and competition in the US gambling industry.